Many Orlando First Time Home Buyers are still sitting on the fence with the thought in mind that the market has not yet hit bottom and they are waiting for prices to fall. I must agree I dont think we are at the bottom yet either. We are bouncing around the bottom and Im sure some area's and homes will continue to go lower value over the next few years, but there should be a different fear in minds of home buyers or should I say a cost associated with waiting for that perceived bottom.
The interest rate. There is one thing that will inevitable happen the interest rate will rise. Over the past month we have seen just that same very thing happen. Rates went from 4.25-4.5% to as high as 5.8% in just a matter of weeks. On average there was a 1% increase in the interest rate. While 1 looks like a small number and really wouldnt make that large of an impact on buying you would be amazed at what a difference 1% can make.
So lets put this scenario into action. Lets say Buyer Sally is preapproved up to $250,000, lets see how a 1%+ increase in interest rates will affect her purchasing power.
Buyer Sally once was able to purchase a home up to $250,000 and have a $1,285/mo payment, but since the interest rate went up 1% she can now only look at houses up to $217,289. She lost over $30,000 in purchasing power. If she waited longer for prices to drop she can now only look at houses up to $195,660 over a $50,000 reduction. If you have ever compared house, you will notice that a $32,000 price difference means a significatly different house and over $50,000 means your not even in the same neighborhood or area of Central Florida.
Now you're probably thinking well it wont matter because if I wait for the Orlando Housing Market to drop to the bottom I will be able to pick up the same home I looked at $250,000 for $217,289. That would mean over a 15% decrease in price, at our current rate of .92% it would take over 16 months for that house to come close to the $217,289 price. However it only took one week for rates to jump over 1%, honestly Im not sure we have a 16-20% price reduction left in this price point.
Orlando First Time Home Buyers shouldnt be looking at just one factor of price but also the purchasing power they have in this current market with low interest rates. If you are ready to consider purchasing your first home in the Orlando area give me a call to discuss your purchasing power.
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